A committee of MPs has urged the government to support smaller housebuilders to help fix the broken housing market.
The House of Commons’ Communities and Local Government Select Committee said it had found that the eight largest firms were building more than half of all new homes in the country, which it argued made the industry over-reliant on an “alarmingly small number of commercial house builders”.
The committee’s report added that while no evidence of land banking by the housebuilders had been found there was little incentive for them to build quicker.
In addition, the committee said land was in such high demand in some areas that developers were paying over the odds, which in turn meant they were having to increase the density of homes on schemes and reduce levels of affordable housing to recover their investment.
Developers were also building more slowly so as not to saturate the market and lower house prices, the report said, and recommended the case be examined for public intervention.
To stop firms’ dominance, MPs said the government needs to support small and medium builders and called for local authorities and housing associations to increase their building activities.
The committee’s chairman, Labour MP Clive Betts, said: “The housing market is broken, we are simply not building enough homes.
“Smaller builders are in decline and the sector is over-reliant on an alarmingly small number of high volume developers, driven by commercial self interest and with little incentive to build any quicker. If we are to build the homes that the country so desperately needs, for sale and for rent, then this dominance must end.”
Meanwhile members of the House Builders Association (HBA) – the housebuilding division of the National Federation of Builders (NFB) – are calling on government to help with hidden taxes that prohibit them building,
The organisation is highlighting the fact that three months before a building’s expected completion, local authorities typically serve a council tax notice. Council tax is then levied when dwellings reach their “completion date”. Nevertheless, developers regularly find that those charges begin before any fundamental services or utilities are even connected.
In Devon, an HBA member paid £12,142 in council tax charges on a site of 40 units. Although no council services were utilised, council tax charges were levied as soon as roofs were completed. The same developer decided to stop furnishing show homes, after it was billed £20,000 for non-domestic council tax rates.
The same story repeats in other parts of the country. In Suffolk, an HBA member paid £19,821.14 in non-domestic council tax rates, as well as £14,141.98 in council tax bills for unoccupied properties. Such a trend has discouraged this builder from building homes speculatively at a time when house building needs to be encouraged.
HBA said: “Although not all local authorities are equally predatory, the existing system is unfair and disproportionately impacts those very stakeholders who can take the UK out of its current housing crisis. It penalises the delivery of new homes and has a negative impact on their affordability.
“Local authorities should be prevented from imposing council tax charges on brand new homes under construction, especially when no direct council services are being provided.”
Mark Farmer, CEO of Cast and the author of a government-commissioned review into housing capacity, commented on the committee’s report: “This report from the Communities and Local Government Select Committee on the capacity of the homebuilding industry has clearly ratified the fact that the industry faces some huge challenges in order to meet this country’s increased need for more homes.
“The conclusions confirm, as has the recent White Paper, that the housing market is broken, and to fix it we need a robust, innovative and productive construction industry. The report sets out clear recommendations on how we can improve the capacity of the homebuilding industry which must be prioritised by the new government that will be decided on 8 June.
“What is noteworthy in the recommendations is clear select committee recognition that we need more diversity in the market, both in terms of tenure and the delivery models employed and this must only be a good thing in terms of the need for some policy stability beyond 8 June.”
